Prophix CEO Shares Predictions for Finance: “Cash is King in 2023”

Jan 11, 2023

MISSISSAUGA, ONTARIO – Just as organizations began to emerge from the many pandemic-related challenges over the last couple of years and pivot their attention back to innovation and growth, macroeconomic headwinds are poised to create another year of market uncertainty in 2023. According to Prophix CEO Alok Ajmera, finance teams that embrace a return to financial planning and analysis (FP&A) fundamentals, alongside infrastructure and data investments, will be better prepared to anticipate and respond to business fluctuations in the months ahead.

“It’s common in times of uncertainty for businesses to shift into survival mode, abandoning the goals and initiatives that are central to their continued growth and success, such as adopting new innovative technology solutions,” said Ajmera. “But as we saw during COVID-19, finance teams that embraced cloud-based FP&A technology were able to leverage scenario planning and make quick adjustments to forecasts based on informed data insights when faced with sudden market changes.

“The anticipated economic climate of 2023 will require finance teams to conduct weekly and even daily cash forecasting to survive this challenging environment. Having the right tools and processes will help them better predict and plan for potential scenarios to keep their businesses on track,” Ajmera continued.

Ajmera shared five predictions for finance teams aiming to carry their businesses through periods of potential economic volatility in 2023:

1. Cash will retake the crown

The economic shifts of the last few years have led to the perfect storm: a trifecta of rising interest rates, growth headwinds and steep inflation are placing pressure on cash – and businesses are feeling the squeeze. The best way for businesses to survive this challenging economic environment where “cash is king” is through rigorous and consistent cash management.

Expect to see finance teams conduct weekly and even daily cash forecasting. Financial planning and analysis (FP&A) software will help companies best manage this consistency, by automatically tracking and analyzing cash inflows and outflows so finance leaders can predict and plan for a variety of scenarios. This level of granular visibility will allow finance leaders to make quicker, better and more informed decisions in the face of business uncertainties.

 2. Financial covenant management will be front and center

For highly leveraged businesses – those with any significant amount of debt – covenant management will be critical in the year ahead to avoid putting the company at risk. If businesses are not managing their covenant tightly through advanced FP&A processes, they will be inviting the bank to come in and collect their cash. In contrast, businesses without debt are in a good position to prioritize growth and use their cash reserves to buy a competitor, grow market share or make other strategic investments.

3. Volatile currencies will require close oversight

Currency fluctuations will continue in 2023, impacting actual profit and global competitiveness and placing added pressure on finance teams to handle contractual and operational risks. Finance teams with international operations will need to closely monitor accounts receivables, accounts payables and debt obligations, as changes in exchange rates run the risk of increasing the actual cost of an outstanding payment or decreasing the actual dollars received in payment.

4. Back to basics in finance

The new year will demand a return to fundamentals, where finance teams will be encouraged to step back and rethink processes, team skill sets and technologies to enable granular monitoring of financial principles and cash flow. Data visibility, financial discipline and human decision-making will rise to the forefront of finance activities, paving the way for the adoption of more advanced technologies like artificial intelligence (AI) and machine learning in the months ahead.

5. Infrastructure and data investments will pay off

An anonymous Navy Seal was quoted as saying, “Under pressure, you don’t rise to the occasion, you sink to the level of your training.” This same idea can be applied to businesses’ financial planning and cash management headed into 2023. Businesses that double down on infrastructure, data and broad analytics technologies will now benefit from a higher level of visibility into critical metrics such as cash flow and debt covenant management for meticulous forecasting and strategic decision-making.